WASHINGTON -- The IRS' proposed rule on sewage facilities "will have the unintended effect of denying tax-exempt financing" for wastewater treatment facilities that have some private involvement but "provide essential municipal services," the Environmental Protection Agency warned recently.

The Internal Revenue Service proposed the rule in May to clarify when wastewater treatment facilities are sewage facilities that, under the tax law, can be financed with tax-exempt private-activity bonds.

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