The Bug:
Allays don't drop their held items upon death.
Steps to Reproduce:
Summon an allay and give it any item.
Kill the allay by executing the following command.
/kill @e[type=minecraft:allay]Observe the loot that it drops upon its death.
Take note as to whether or not allays drop their held items upon death.
Observed Behavior:
Their held items aren't dropped.
Expected Behavior:
Their held items would be dropped.
I've changed the title of this ticket to mention that allays don't drop their held items upon death, as this issue isn't exclusive to when they're killed by players or mobs, and can also be seen when they're killed via commands and through other sources.