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By Nick Carey
May 15 (Reuters) - For Kevin Kookogey, the U.S. Internal Revenue Service's scrutiny of his one-man outfit providing conservative mentoring for students was so onerous he thought it was trying to deter him from political activity.
"It worked," said the Tennessean who ran the group Linchpins of Liberty. "I completely shut down and do my mentoring without fundraising so I can avoid getting audited."
Kookogey is one of many conservatives who complain about unfair treatment at the hands of the IRS, the U.S. tax service that admitted last Friday it had inappropriately singled out the Tea Party movement and other conservative groups for extra examination.
On Tuesday, a government watchdog sharply criticized the IRS for its targeting of conservative groups and warned that the agency's actions gave the appearance that it was not politically impartial.
As the political scandal grew, Attorney General Eric Holder promised on Tuesday to investigate the agency and President Barack Obama called the watchdog report's findings "intolerable and inexcusable." Both Democrats and Republicans on Capitol Hill have called for investigations.
Conservative leaders and their lawyers say many of those ensnared were small groups, ill-equipped to handle the intense questioning and document demands that came as they sought tax-exempt status.
"What has got lost in all the news about the IRS targeting conservative groups is that these aren't the big fish like FreedomWorks, Tea Party Patriots or Americans for Prosperity," said Dawn Wildman, president of SoCal Tax Revolt Coalition Inc, a conservative group in Southern California, in reference to some of the largest such groups.
Wildman says she dropped her group's application for tax-exempt status because of IRS push back. "These are just small, largely self-funded, mom and pop Tea Party groups that lack resources to fight back," she added.
The conservative American Center for Law and Justice, which provided legal aid to 27 targeted groups, said the intense scrutiny placed a hardship on its clients, whose average fundraising is around $3,000 to $4,000 a year.
"The IRS knew from the applications the size of the group and picked on the small ones figuring they wouldn't put up a fight," chief counsel Jay Sekulow said. "Most of the big guys got a pass."
The IRS declined to comment on which groups it targeted or on any individual cases.
QUESTIONS 'IMPOSSIBLE TO ANSWER'
Ginny Rapini, a Tea Party leader from Northern California, said her personal IRS travails were highlighted in a U.S. House floor speech last year by Republican Representative Tom McClintock, who accused the agency of harassing Tea Party groups and subjecting one unnamed leader to a personal audit.
The IRS denied at the time that it had targeted conservative groups for special attention, an assertion that has proven to be an embarrassment for the Obama administration in recent days.
While embroiled in a lengthy dispute with the IRS over her group's tax-exempt application, Rapini said the IRS office in Ogden, Utah, audited her and alerted California tax authorities that she and her husband had neglected to pay $20,000 in taxes. They were billed $43,000 with penalties and fees.
Rapini alleges that the personal audit and her group's application were connected. She intends to pay the taxes, which she blamed on an accounting error and are owed to the state, but is still fighting the fees. The IRS declined to comment.
Groups whose leaders were interviewed by Reuters described inquiries which they regarded as excessive and costly, with multiple requests for information, donor lists and political affiliations.
Toby Marie Walker, a leader of the Waco Tea Party in Texas, said her group raised only about $5,000 last year and had to seek free legal assistance to deal with the IRS.
Walker said some questions - such as one asking if she had personal relationships with political figures - were "entirely subjective and almost impossible to answer." The letter made clear there would be penalties for incorrect answers.
"My state representative (Texas House member Charles "Doc" Anderson) is also my veterinarian," she said. "He neutered my dogs, so does that qualify as a close relationship?"
Common questions included asking whether any group members have "run or will run for office in the near future."
Todd Maynes, a tax partner at the Chicago office of law firm Kirkland & Ellis, described the IRS's questions as "very unusual" from an organization he usually regards as "fair and efficient."
"This is not the IRS I've come to know," he said.
Rapini said she endured two rounds of IRS queries after seeking tax-exempt status for the NorCal Tea Party, which raised $100,000 in 2012. The second letter gave her 15 days to answer 19 questions and multiple sub-questions.
She boxed up newsletters, meeting minutes, even a pocket U.S. Constitution and paid $100 to send it to the IRS.
She said the IRS reviewed her returns and alerted California authorities to discrepancies in her filings. "It doesn't pass the smell test for me," she said.
Three weeks after McClintock mentioned her case on the House floor, Rapini said the IRS approved her group's application.
(Reporting by Nick Carey in Chicago; Additional reporting by David Lawder in Washington; Editing by Marilyn W. Thompson, Mary Milliken and Eric Beech)