Custom tool error: Failed to generate file

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I'm working on a windows application (C#) that was created in VS 2012 (Framework 4.5) windows forms. The requirements requires it to be used for older versions of windows so I'm setting the target framework to .NET Framework 4 and Platform target to x86. Once its done and I try to compile I get the following error:

Custom tool error: Failed to generate file: The service reference is not valid for the current .NET Framework version or project type. You can change the service reference configuration in the .svcmap

I tried unchecking the box "Reuse types in referenced assemblies" in the Service References before flipping to framework 4 but no luck.

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