.htaccess in subdirectory 'overriding' parent htaccess
To allow execution of rewrite rules from parent .htaccess (htaccess from parent folder), you need to explicitly allow it (Apache will treat rewrite rules in current .htaccess as the only one that need to be executed, as long as rewritten URL remains in the same subfolder).
You need to add this line to your .htaccess in sub-folder:
RewriteOptions inheritApache manual: http://httpd.apache.org/docs/current/mod/mod_rewrite.html#rewriteoptions