The official in Attorney General Andrew Cuomo's office spoke on the condition of anonymity because the agreement hadn't yet been announced.
Cuomo has sought to end such travel perks - a decades-long tradition at many public agencies.
About 60 past and present MTA board members - many of them multimillionaires - had gotten the free tags for life. Among them is former Chairman Peter S. Kalikow, who owns dozens of cars and reportedly has eight tags.
The MTA released the following statement:
"In light of Attorney General Cuomo's opinion, the MTA will amend its longstanding practice of issuing free passes on the agency's transit network to its current and former board members.
Subject to approval of its Board, the MTA would rescind its policy of issuing free lifetime passes on its operating systems to former board members. Hereafter, pursuant to the MTA's enabling legislation, active board members may only utilize passes on the transit network to the extent that such use constitutes actual and necessary expenses incurred in the performance of their official MTA duties."