Oregon is one of the few states that allows current year paid federal income tax to be deducted on the Oregon state return. However, you deduct the federal income tax paid on your Oregon return only in the year in which you actually pay the federal tax.
So in the case of an audit, when you pay additional federal income tax in a later year, that additional federal income tax gets deducted in Oregon in the year you paid it, not in the year of the original return.
As the state says in its instructions:
"Did you pay additional federal tax because you were audited or filed an amended return after the due date of the original return? If so, don't change the amount on your amended return. Claim the additional federal tax as a subtraction on your Oregon return in the year you paid the additional tax." (page 32 at https://www.oregon.gov/DOR/forms/FormsPubs/publication-or-17_101-431_2018.pdf). In fact, read the examples in the right-hand column - one of them specifically addresses audits.
To enter the additional amount, please proceed in the Oregon interview to the screen entitled "Here's the income that Oregon handles differently". Scroll down to the subheading "Misc adjustments". Click on Start for "Additional Federal Tax Paid for a Prior Year". Answer the questions, entering the amount of additional federal tax paid in the current year because of an audit in a prior year.
