The Premier League side are reported to be working on a deal for the Hamburg centre-back amid a complicated contract wrangle involving the club, Fifa, his agent, and his father
Tah, who represents Germany Under-17s and will turn 18 this month, is in a contract dispute with Hamburg and has been linked with a move to the Premier League in recent weeks.
The centre-back signed an extension until 2018 in November but Fifa rules dictate that players under 18 can only be tied down for a maximum of three years, and any deal running for longer will not be recognised by the governing body.
Goal understands that City are interested in a £6 million move for the defender and Sebastian Arnesen, a scout at City and son of Frank, the sporting director at Hamburg until last year, is said to have been working on the deal on the Premier League club's behalf.
Hamburg are hopeful of securing a deal that would see a £25m release clause inserted into Tah's contract on his 18th birthday - a move City are trying to prevent.
However, agent Akeem Adewunmi has claimed that stories linking his client with a move away are not genuine and also insisted that the new contract should be valid.
"There is nothing behind this [rumour]," he told the Hamburger Morgenpost. "It is totally made up and somebody intends to harm Jonathan and HSV.
"The parents have signed and the boy has signed. Thus, the contract is valid. All this is accurate. Jonathan wants to stay until 2018 at HSV. People seem to want to challenge something, where there is nothing to challenge."
A release clause of €25m (£20.7m) has been inserted into the the controversial contract, according to reports in the local press which were later confirmed by Tah's father, Aquilas.
But Aquilas, who has no contact with the rest of the Tah family after divorcing his wife 14 years ago, is willing to go to court to stop Adewunmi representing his son.
"The contract is only in the interest of the HSV and the consultant - and not in the interest of my son," he told the Hamburger Morgenpost.
"I should never have him signed with him. I will go to court. According to FIFA rules, the contract is invalid because it is more than three years. This is not allowed for a minor. I will make sure that Adewunmi has nothing to do with my son."
Tah, of Ivorian descent, has made 15 Bundesliga appearances for the relegation strugglers this season, making his first start against Werder Bremen at the end of September.