WASHINGTON -- The Internal Revenue Service may never resolve the main tax law issue facing the municipal swap market: whether an issuer must take into account the payments or receipts from a swap contract in determining the yield of the related tax-exempt bonds, agency officials say.

The issue -- put more broadly, whether a municipal swap contract should be integrated with the bond issue it hedges for tax purposes -- is becoming increasingly important as the firth anniversary of the tax reform act rolls around and more municipal issuers begin rebating arbitrage to the federal government.

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