TextTransform.exe seems to only accept an older version of C#

When I expand T4 templates inside Visual Studio, I can use the full C# 3.0 syntax, including LINQ expressions, etc. When I expand it outside Visual Studio using TextTransform.exe it complains about LINQ expressions and other new featu开发者_运维问答res of C# 3.0. Is there a newer version of TextTransform.exe?

The one I'm running is in:

C:\Program Files\Common Files\Microsoft Shared\TextTemplating\1.2\TextTransform.exe

1.2 is the version of TextTransform that shipped with Visual Studio 2008. However, it will use C# compiler version 2.0 unless you specify version 3.5 in the template directive. 3.5 is the internal version of the C# CodeDOM provider for C# 3.0 compiler.