Qualifying small entities can pay a reduced rate fee for their patent application if they file a small entity declaration. For the purposes of determining the patent application fees, small entity are defined by the USPTO as (1) independent inventors, (2) small business concerns (i.e. a business with 500 or less employees during a fiscal year), and (3) nonprofit organizations. In order to qualify the the exception, independent inventors must maintain the patent rights or transfer the rights to a small business concern or nonprofit organization. The small entity status does not apply in cases where the small entity (independent inventor, small business concern, or nonprofit organization) is transferring the rights to an entity that does not qualify as an small entity. The reduced filing and maintenance fees are intended to help promote innovation by small entities.

References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Manual of Patent Examining Procedure, 8th Edition

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