If an inner class is a member, then a receiver parameter works fine:

class Top {
  class Inner {
    Inner(Top Top.this) {}
  }
}

but if the inner class is local:

class Top {
  void m() {
    class Inner {
      Inner(Top Top.this) {}
    }
  }
}

then javac (JDK8 b116) gets confused - it thinks Inner is top level:

error: receiver parameter not applicable for constructor of top-level class
      Inner(Top Top.this) {}
                ^

This is a bug. A local class is a perfectly good inner class - the ctor of Top$1Inner.class even takes a Top - so its constructor ought to permit a receiver parameter. This is even true when the local class is inside a default method of an interface - in that case, the type of the receiver parameter is the interface. (As of JLS8, it is legal to say InterfaceName.this inside a default method of an interface.)