I also was encountering an issue with ATT on IOS 17. The tracking transparency worked perfectly fine on older versions, and was even working on my local installs of physical devices with IOS 17. However, when submitting it for review we were being rejected for not finding that prompt.
In our case, we were prompting for ATT from initial app loading, one of the first things that the app tried to do after starting. When working locally or even testing through Internal Groups within Testflight, everything was working fine. The real issue appeared when we released to External Tester Group that Testflight presents the two "From the Developer" and "Share Feedback" splash screen information views. Something changed in IOS 17 that allows the app to fully start in the background while those informational pages were shown. Our prompt was being attempted, but did not show on screen and would not display after the Testflight info screens were clicked through. However, when you re-opened the app, it would recognize that we didn't have an answer for the prompt and re-ask on second opening of the app
We changed the action that triggered the ATT prompt to be after a point where the tester is past those initial Testflight screens and were able to move on.
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TLDR We prompted for ATT first thing upon app init and it worked in previous IOS versions. IOS 17 + Testflight doesn't wait for the tester to finish information screens before that prompt was fired. We moved the prompt to not be right away at app init and were able to make it through review.